Beefy, I know you know far more about Mach3 than I do but that does not sound right to me. This video of cutting with THC turned off clearly shows the ArcOK signal coming on in Mach3. Watch the onscreen LED.
https://youtu.be/-f1m3JXdOhQ

But I agree, it would be good if the OP could share his GCode and any subroutines called by that code.